How Many Credit Cards Is Too Many?

Question: I think my husband is a hoarder — of credit cards. We have eight now, but we only use three. He insists we need the extra cards as a back-up plan, in case we have an emergency and need quick cash. 

This seems like a strange plan. I can’t put my finger on it, but it sounds like a bad idea. Is it?

— Christiana in New York

Howard Dvorkin CPA answers…

Let me put a finger on it for you both: It’s a terrible plan. Here are just some of the reasons…

Credit score

While most of an excellent credit score (35 percent) is determined by paying your debts on time, a smaller chunk (15 percent) is decided by something called “length of credit history.” That means how long an account has been open, and how often it’s used. If your husband doesn’t plan to use five of his credit cards at all, that can ding his credit score.

Another 10 percent of a credit score is determined by “new credit.” If your husband opened five new credit cards in the past few months, that’s a red flag to lenders that your husband is in financial problems and is planning to run up big debts.

Forced closure

Another partial hit on a credit score is closing many accounts at the same time. Of course, your husband has no intention of doing so, but the credit card companies themselves can do that if the cards aren’t used at all. They don’t like issuing cards and not seeing any transactions.

Identity theft

If you have cards you don’t often use, and therefore don’t check, you could have your information stolen and not realize it until the damage is done. Credit card companies have become very good at notifying cardholders and wiping out fraudulent charges, but even under the best circumstances, it can be a time-consuming and stressful process.

Temptation

While your husband has a noble goal — providing for his family in case of a cash crunch — you or he may be tempted to roll out some of those cards for less crucial reasons. After all, those cards are probably sitting in a drawer, beckoning you with their easy use. Will you succumb?

An actual emergency

Finally, here’s the worst part: If you suffer an actual emergency, running up your credit cards is the worst way of dealing with it. The best is to create an emergency fund, but if you don’t have the resources right now to do that, read Debt.com’s report, What To Do In An Emergency With No Emergency Fund. You’ll notice, among all the practical ideas, opening a slew of credit cards isn’t among them.

Here’s what I’d recommend: Slowly close the cards you’re not using. Not all at once. Keep the ones with the lowest interest rates and best rewards. Use the remaining cards and pay off the balances each month.